Attorney General Jack Conway announced today that MoneyGram Payment Systems, Inc., has entered into an Assurance of Voluntary Compliance (AVC) with Kentucky and 43 other states and the District of Columbia, in response to concerns about the use of the company’s wire transfer services by fraudulent telemarketers. MoneyGram will, among other things, fund a $1.1 million national consumer awareness program and print very prominent consumer warnings on the forms used by consumers to wire money.
“To keep perpetrators from defrauding consumers, we need to make it harder for them to utilize traditional methods of transferring money,” said General Conway. “This agreement is a step in the right direction by creating a model fraud warning, consumer education program, and enhanced training for money transfer agents.”
MoneyGram, based in Minneapolis, offers money transfer services by wire at more than 25,000 locations in the United States and more than100,000 locations around the world, including grocery stores, gas stations and other retail businesses.
The problem addressed by the AVC is the high number of transfers that involved money wired by consumers to fraudulent telemarketers and other scam artists. For example, some telemarketers, often based in other countries, use a “lottery” scam, in which they tell vulnerable consumers they have won a large sum of money, but must pay taxes or other charges in order to claim the winnings. The victims are then directed to send the money by wire, because wire transfers are fast, there are transfer agents in most communities, and funds can be picked up in multiple locations.
The problem of fraud-induced transfers is substantial. In 2003, a survey conducted in seven states of transfers more than $300 to Canada by another major money transfer company, estimated that more than 29% of those transfers were fraud-induced, resulting in consumer losses in the year 2002 of approximately $113 million.
Terms of the agreement also include:
- Prominent warnings about fraud-induced wire transfers must appear in English and Spanish on the front page of MoneyGram’s “Send Form”, and comparable warnings are required for telephone and web transfers. The warning is to occupy at least 40% of the form’s front page.
- MoneyGram will pay $1.1 million for a national consumer education program that will be coordinated by the AARP Foundation.
- MoneyGram will continue its current policy of reimbursing the amount of any transfer to a consumer who requests, prior to pickup, that the transfer be stopped, and reimbursing transfer fees if the consumer reasonably claims that the transfer was fraud-induced.
- The company will send prominent anti-fraud messages to its agents electronically every month or whenever a proposed transfer exceeds a certain amount, revise and enhance the company’s agent anti-fraud training programs, and provide special training to agents with elevated fraud levels at their locations.
- MoneyGram will take appropriate action to suspend or terminate agent locations that are involved in fraud or that do not take reasonable steps to reduce fraud.
- It will block wire transfers from specific consumers or to specific recipients when the company receives information from a state that there are good faith grounds to believe that fraud will occur, until such time as the consumer is counseled on fraud and requests resumption of the transfer.
- MoneyGram will ensure that money transfers sent from the United States can only be picked up in the country designated by the sender, with a potential extension of this policy to the state or provincial level.
Signing the AVC were the States of Alabama, Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia and Wyoming, and the District of Columbia.